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The Collapse of Exchange Rate Regimes : Causes, Consequences and Policy Responses - George S. Tavlas

The Collapse of Exchange Rate Regimes

Causes, Consequences and Policy Responses

By: George S. Tavlas (Editor)

Hardcover

Published: 31st December 1996
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ical) and to self-fulfilling currency crisis, respectively. Research stressing the former approach was pioneered by Krugman (1979) and Flood and Garber (1984). According to this line of research, the failure of governments to adopt domestic monetary and fiscal policies consistent with their stated exchange rate targets leads to a gradual diminution of reserves and eventually a stock adjustment that depletes reserves suddenly in one attack (Sachs, Tornell, and Velasco, 1996, page 47). The result is either a devaluation of the exchange rate or a switch to floating. Subsequent work of this genre has specified a number of other channels, in addition to that involving inconsistent and unsustainable monetary and fiscal policies, that can precipitate an attack: 1. Inconsistency between external and internal objectives. The stances of monetary and fiscal policies may be consistent with the authorities' exchange rate target, but domestic economic indicators (such as the unemployment rate) may be inconsistent with internal balance, resulting in pressures on the authorities to relax macroeconomic policies. Private agents, aware of this inconsistency, perceive an opportunity for profits from a currency devaluation and precipitate an attack. 2. Contagion effects. Prior to an attack on another currency (say that of country B), the market may view a country's (say, country A's) exchange rate as consistent with economic fundamentals and, thus, sustainable.

Currency Crises--Introductionp. 1
Why Clashes Between Internal and External Stability Goals End In Currency Crises, 1797-1994p. 7
Analyzing and Managing Exchange-Rate Crisesp. 39
A Currency Transactions Tax, Why and Howp. 63
The Mexican Financial Crises of December 1994 and Lessons to be Learnedp. 71
Country Fund Discounts and the Mexican Crises of December 1994p. 81
Speculative Attacks and Currency Crises: The Mexican Experiencep. 105
A Random Coefficient Model of Speculative Attacks: The Case of the Mexican Pesop. 123
The Lira and the Pound in the 1992 Currency Crisis: Fundamentals or Speculation?p. 143
Economic Models of Speculative Attacks and the Drachma Crisis of May 1994p. 161
The European Monetary System: Crisis and Futurep. 171
The Lender of Last Resort Function Under a Currency Board: The Case of Argentinap. 195
The Behavior of Foreign Currency Holdings During Currency Crises: Cause and Consequencesp. 221
Table of Contents provided by Syndetics. All Rights Reserved.

ISBN: 9780792398691
ISBN-10: 0792398696
Series: Open Economies Review , No 7:1
Audience: Professional
Format: Hardcover
Language: English
Number Of Pages: 247
Published: 31st December 1996
Publisher: Springer
Country of Publication: NL
Dimensions (cm): 24.77 x 16.51  x 2.54
Weight (kg): 0.61